THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

SHIHAB RATTANSI, CNN ANCHOR: A terrorist nexus in a beautiful corner of South America. New claims that the triple border area of Argentina, Brazil and Paraguay is being used to plot attacks on Western targets, and there's new evidence of increased cooperation between the terror groups. Are Western intelligence agencies listening? And what can they do about this front in the war against terror?

Hello and welcome to INSIGHT. I'm Shihab Rattansi, in for Jonathan Mann.

The border region between Argentina, Brazil and Paraguay has long been known as a classic frontier region where people who want to disappear loiter and where the shops are awash with smuggled goods.

But in recent years, there have been allegations that the area isn't just a collection of freewheeling border towns, but a major center for groups the United States considers terrorists. Now claims that it's from this area that the next major attack against United States interests will originate.

Today on INSIGHT, tracking terror in South America.

(INTERRUPTED FOR LIVE NEWS UPDATE)

After the attacks of September the 11th, United States President George W. Bush warned that the global war on terror would be fought on many different fronts. It's becoming increasingly clear just how many fronts there are in this war.

Mike Boettcher traveled recently to a tribal area of South America where Brazil, Paraguay and Argentina met. He filed our exclusive report.

(BEGIN VIDEOTAPE)

MIKE BOETTCHER, CNN CORRESPONDENT (voice-over): South Americans call this place the triple border, a tourist haven, the spot where the nations of Argentina, Brazil and Paraguay intersect at one of the natural wonders of the world, Iguazu Falls.

In counter-terrorism circles, it is known as something else: a terrorist haven, a land of porous borders and base for terrorism financing and planning.

Halfway around the world, on the wall of a top al Qaeda operative's abandoned house in Kabul, Afghanistan was this, a giant poster of Iguazu Falls.

CNN has learned from anti-terrorism coalition intelligence sources that several top terrorist operatives recently met in this isolated part of South America. Their purpose, according to those same sources, to plan attacks against United States and Israeli targets in the western hemisphere.

MIGUEL TOMA, ARGENTINEAN SECY. OF INTELLIGENCE (through translator): We had intelligence that pointed to increased terrorist activity. It is not unrealistic that there could be some action to prevent or to react to an attack on Iraq. We need to react because of the global conflict.

BOETTCHER: Since 1992, when a terrorist bomb ripped apart the Israeli embassy in Buenos Aires, Argentina has been extremely active, investigating global terrorist groups and their connections.

Argentine intelligence documents previously obtained by CNN diagram links between mosques and businesses in the tri-border region to a laundry list of groups which have claimed credit for terror attacks. Egypt's Gamaa al-Islamiyya, publicly allied with al Qaeda, and Lebanese Hezbollah and Islamic Jihad, all groups identified by the United States State Dept. as terrorist organizations.

Additional evidence of a global link: thousands of United States dollars marked with stamps from Lebanese currency exchange banks, which Argentine investigators allege was used to finance terrorists in South America. Tens of thousands more in phony $100 bills, and receipts from huge wire transfers made between the tri-border areas and the Middle East.

Argentina's top counter-terrorist cop on the tri-border sees a variety of terrorist groups cooperating here because of a common enemy, the United States and Israel.

ROBERT ONTIVERO, ARGENTINEAN COUNTER-TERRORISM (through translator): Yes, we have found the collaboration, in the say way that legal organizations need to collaborate and share information, terrorist organizations need to have that same collaboration, whether it be in training, materials, people or information.

BOETTCHER: Hezbollah, Islamic Jihad and al Qaeda, all groups that Argentine authorities are tracking in their region, have significant ties to this man, Imad Mugniyah photographed here in Lebanon about eight years ago. He is walking with Hezbollah's top leader, Sheikh Hasan Nasrallah.

Obtained exclusively by CNN, it is one of the few existing photos of Mugniyah, one of the world's most wanted men, suspected of being the mastermind in a long list of attacks against United States and Israeli targets over the past 20 years; the 1983 U.S. marines Beirut barracks bombing, and the 1992 bombing of the Israeli embassy in Buenos Aires, just two examples.

Middle East intelligence sources tell CNN Mugniyah uses both Iran and Hezbollah-controlled areas of Lebanon as his bases, and from those locations is directing a new terrorist effort in South America, making plans to hit United States and Israeli targets in the Americas if the United States attacks Iraq or Israel is drawn into the conflict.

Argentina's spymaster, Miguel Toma, met recently with his counterparts in Washington about the possibility of a new terrorist defensive launched from South America.

BOETTCHER (on camera): Does what happens in your region, in South America, impact the security in North America.

TOMA (through translator): Absolutely. This is a central theme discussed in recent trips to Washington. There is a direct correlation between terrorism here and the United States.

BOETTCHER (voice-over): Locals here joke there are more spies than tourists in tri-border these days.

(on camera): When the war against terrorism was launched after the 9- 11 attacks, intelligence agencies from around the world made this place a focus of their attention. But now many of the people they were watching have moved on.

(voice-over): Argentina's counter-terrorism police assert that terrorist operatives have dispersed east to the remote jungles of Brazil, and as well to Brazil's financial capital, Sao Paolo, and west to the Chilean free-trade-zone city of Iquique, located on the Pacific coast in Chile's northern desert.

We went there to take a look for ourselves. It is a place where money and merchandize move freely, virtually unchecked. 48 false Pakistani passports were recently seized by police here, believed destined for terrorist use in upcoming attacks.

One year ago, United States officials requested that Chile investigate terrorist activity in Iquique. Jaime Nadia (ph) is the Chilean judge assigned to write the secret summary.

(on camera): But are these things that Americans should be concerned about?

JAIME NADIA (ph), CHILEAN JUDGE (through translator): It's part of the secret summary, what you are asking. But I can inform you that there are many people that appear in the investigation.

BOETTCHER: Individuals in South America suspected of planning and financing terrorism have learned to adapt. They've spread out, playing a game of cat and mouse with authorities who are chasing them from the jungles of Brazil to the deserts of Chile.

Mike Boettcher, CNN, Iquique, Chile.

(END VIDEOTAPE)

RATTANSI: We'll take a break now, but when INSIGHT returns, we'll talk to Mike Boettcher about his report.

Stay with us.

(COMMERCIAL BREAK)

RATTANSI: The aftermath of the horrific terrorist attack in Bali that claimed the lives of more than 180 people last month. Al Qaeda claimed responsibility for those attacks on a Web site affiliated with the group. Indonesian authorities now say a man in their custody has confessed to participating in the plot. He was the owner of the minivan that was packed with explosives. Police say he's provided very useful information in the case.

Welcome back.

United States officials have constantly warned that the roots of international terror groups are deep and stretch across the world. Intelligence officials have been keeping an eye on activities in Southeast Asia that may be linked to al Qaeda.

As Mike Boettcher told us, there are ominous signs that a new front is reported in South America.

Mike Boettcher joined us a short while ago here in Atlanta, and I began by asking him whether the main reason for the triple border regions reputation in the United States as a center for international terrorism was simply because a large population of Muslims lives there, a charge often made by residents in the area.

(BEGIN VIDEOTAPE)

BOETTCHER: No. I would say, though, that the tri-border area, one of the most beautiful places on earth, with Iguazu Falls, 99.9 percent of the community there just wants to make a living, wants to do business.

But the Argentineans will tell you that since 1992, when the Israeli embassy was bombed, they've spent almost 10 years now investigating links to the tri-border area to that bombing, and also links between the bombing of the Jewish Community Center in Buenos Aires in 1994. And they believe that they have strong, strong evidence, and I've seen a lot of the evidence, and it is compelling.

RATTANSI: Have we seen an upsurge of activity then since September 11 and the war on terror?

BOETTCHER: Well, actually, what you've seen since September 11 are groups that coalition intelligence sources say are involved in terrorism, who were using the tri-border area. They allege that they have spread out to other areas because of the heat placed on them in that area.

For example, they allege they moved into certain communities in Brazil, also Sao Paolo, and then west to the free-trade-zone city of Iquique in Chile, and that they have adapted, these operatives, they claim, according to the coalition intelligence sources. They claim these terrorist operatives have adapted, like other terrorist operatives in the rest of the world have, in terms of dealing with the pressure put on them by Western and other governments who are part of the coalition.

RATTANSI: You mentioned in your report that a meeting recently took place in which further attacks were planned. Who was at that meeting?

BOETTCHER: Who exactly is very difficult to say, but I am told by very reliable sources that there were those who are affiliated with Lebanese Hezbollah, also those who are sympathetic to al Qaeda, but not direct members of al Qaeda.

And frankly in this day and age, it's the belief of many terrorism experts, it doesn't make any difference about labels anymore, because all of these various groups have a common enemy, and that is the United States and Israel.

RATTANSI: There are the cynics, though, who'd say that as the trail of al Qaeda goes cold, this is just an attempt by United States intelligence agencies to cover their backs, to focus on more recognizable entities, such as Hezbollah, Islamic Jihad, and so on.

BOETTCHER: I think at the very beginning, it was stressed by the administration, and that's the Bush administration, that's since been lost, that they were going to go after various groups around the world.

You saw action in the Philippines, and I think you'll see further action in the Philippines.

I think in the future you'll see some coordinated effort in South America, and you're going to see it in Asia. Certainly, the trial of al Qaeda hasn't gotten cold in Asia. It may have I Europe, although European authorities in the past few weeks are on the highest alert, expecting an attack there by al Qaeda.

But in terms of this being a backup position because they cannot get to al Qaeda, coalition intelligence operatives that I've spoken to say it's simply not true.

RATTANSI: A lot of focus on Imad Mugniyah, who is often thought of to have more to do with Hezbollah than any other group, I suppose, but is the assumption now that he's a firm member of al Qaeda now?

BOETTCHER: No, no. Not a firm member of al Qaeda, but has links to al Qaeda.

I mean, the way that it works in the world right now, according to many people around the world I've spoken to, is that groups -- let's say there is a particular plan to launch a particular attack. Groups do cooperate, because they have a common enemy.

Some groups have a better infrastructure in certain parts of the world. There needs to be cooperation in terms of laundering money and moving material and explosives and weapons.

So groups do cooperate, and have been cooperating before 9-11.

RATTANSI: But you mentioned hard evidence. Where is the actual hard evidence? Some of the examples you cited in your report, such as a large amount of remittances to the Middle East, for example, could simply be explained by an expatriate community working hard in South America and sending money back home.

BOETTCHER: Well, the evidence comes from recent arrests in the past few months from very high-ranking officials in al Qaeda and also in other organizations, which have laid out specifically how this alliance does work, and how there is cooperation around the world.

Now, the Argentineans have spent a lot of time on this. They know the people it was sent to, how it went. They've been at it a lot longer than the United States in terms of trying to look at the global reach, and they know a lot more about it than I do, and they are absolutely convinced. And this is a country that is not involved in the geopolitical conflicts of the Middle East, but was the victim of terrorists.

RATTANSI: But in a story like this, you're depending a great deal on the intelligence services and so on, but how can you trust them? Why are they telling you all this on an anonymous basis? Why now?

BOETTCHER: Well, because I -- well, not just now. I mean, I've been covering terrorism since 1976, so I know a lot of these people very well. They're not telling everybody this, but they're telling me a lot of things, because I know a lot of people.

And there are -- you know, I think that I have enough experience to filter out what is BS, so to speak, in American slang, and what is true, because I just don't talk to those groups. I mean, I spent a large amount of time in Lebanon speaking to Hezbollah, for example.

And certainly, in this dangerous period we're entering into in the world, you know, Hezbollah, for example, feels threatened as well. They feel that they could be the object of an Israeli or U.S. attack. And so we tried to get all sides on this.

But in terms of talking about planned terrorist attacks, the best way is to go to the source that is monitoring this, because the terrorists aren't going to tell you. You've got to go somewhere, so we deal and talk to a lot of various counter-terrorism experts and operatives around the world.

RATTANSI: Mike Boettcher, thanks very much.

(END VIDEOTAPE)

RATTANSI: We'll take another break now, but when we return writer Sebastian Junger joins us. He's just returned from the tri-border region.

Find out what he discovered there when we return.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, U.S. PRESIDENT: And the only way to treat them is what they are, international killers. And the only way to find them is to be patient and steadfast and hunt them down.

(END VIDEO CLIP)

RATTANSI: CNN's Mike Boettcher has uncovered new information about the triple border region between Argentina, Brazil and Paraguay, but United States intelligence agencies have had their eye on the region for a decade.

Now another journalist has ventured there, and he's going even further in his allegations about the area's connection to international terrorism and possibly even to the attacks of September 11.

That journalist is Sebastian Junger. He joins us now from New York. He's a contributing editor for "Vanity Fair" magazine, and his article about the tri-border region appears in this month's edition of "Vanity Fair."

Mr. Junger, thanks very much for joining us.

SEBASTIAN JUNGER, JOURNALIST: Thank you.

RATTANSI: Having been there, perhaps you can give us an idea of how an area which has been alleged to have such links to international terrorism has been allowed to function for so long.

JUNGER: Well, you have to understand, it's -- the triple border area is surrounded by very corrupt governments.

The president of Argentina himself is alleged to have been paid off by Iran to suppress an investigation into two terrorist attacks in his country. If a president is being paid off, of course almost anything is possible.

There's a large Muslim community there. It's a very chaotic, a very chaotic community, a lot of black market trading.

And, finally, it's the last place Westerners, Western intelligence, would think to look for al Qaeda.

RATTANSI: But let me put it to you, the same point I put to Mike, that many people living there say it's just a simple frontier town area where the free market reigns supreme. The Brazilian president, for example, has said that the streets of the tri-border area are as safe as the streets of London, that all of this is complete nonsense.

JUNGER: Well, there's so many examples of terrorists who have passed through or have lived there. Said Muklis (ph), who was the alleged mastermind of the massacre in Luxor, Egypt was arrested in that area.

Then there was a very interesting case of Abdel Fatta (ph), a young Moroccan, low-level al Qaeda operative who was there. He had a change of heart when he heard about the attacks coming up in the United States, and he went to the authorities. He was arrested on other charges. He wrote a letter to the United States embassy, passed it to his lawyer, warning about attacks on September 11. He passed that letter a week before hand.

Clearly, if a 26-year-old Moroccan in Brazil knows to the day that New York was going to be attacked, clearly al Qaeda is operating in that area.

RATTANSI: What else have you discovered about the links to September 11 and the tri-border area?

JUNGER: Well, as I said, there was general foreknowledge of the attacks in that area. I have a contact in Argentine intelligence, former Argentine intelligence, who's been monitoring this activity for about 10 years. He has expressed great frustration that American intelligence has ignored his information for years. That's an account that's been confirmed by other Argentine and Paraguay intelligence operatives down there.

He also said that there were meetings this past month, in October, top Hezbollah and even al Qaeda operatives in triple border and in Sao Paolo, meetings about attacks in the United States. Very, very specific information about attacks in the United States.

I've had some confirmation of that from other Western intelligence agencies. For me, it's incredibly disturbing that all of this is sort of being pieced together from so many different sources.

RATTANSI: Are United States intelligence agencies listening to all these warnings now?

JUNGER: Well, there was an interesting lapse for a couple of years. Apparently -- of course, it's hard to dig information out of intelligence agencies, but apparently the CIA commissioned Argentine intelligence to infiltrate triple border in the mid-90's. They were concerned about Hezbollah.

Argentine intelligence came back with a report. It was called Operation Centaudo (ph) -- a report chronicling not only Hezbollah activity, but al Qaeda. They had very good evidence of al Qaeda activity there.

The CIA apparently thought that the information was just too dramatic, that it just was not plausible, and essentially rejected it. And that caused an almost complete falling out, a complete break, between CIA and Argentine intelligence. That break has only been mended in the past year or so.

RATTANSI: You allege also though that the tri-border areas isn't just a meeting place and a place to launder money and so on, but there's also active training going on there. What can you tell us about that?

JUNGER: Well, there are about half-a-dozen training camps in the jungle, some of them on the large landholdings of Lebanese-Syrian businessmen in the area, who allegedly have funneled funds to Hezbollah.

I spoke with a man who'd -- an Argentine ex-police officer who had infiltrated one of these camps, had been trained, had been trained in a camp on the Paraguayan border, in the jungle. He saw IRA, Irish Republican Army, obviously, ETA from Spain, terrorists from all over the world, including al Qaeda and Hezbollah.

One of his instructors, he claims, was an American Michigan Militia member who had seen service in Vietnam and was now in triple border helping, working with the terrorists.

RATTANSI: One could perhaps understand why Middle Eastern extremists groups might gather there, and indeed possibly white supremacists, but surely it's the very ideology of the IRA, or the FARC has been mentioned as well, which would prevent them from joining up with extreme Muslim groups.

JUNGER: You know, you would like to think so. Obviously, it wasn't a problem for McVeigh. He was very willing to attack the United States and there is some very serious concern that his partner, Nichols, he was married to a Philippino woman, had met with Arab extremists in the Philippines prior to Oklahoma City bombing.

An American ex-special forces soldier was charged with providing security for bin Laden when bin Laden was in Sudan in '94 meeting with Imad Mugniyah of the Hezbollah.

Stranger things have happened. It is a shocking thing to hear, but it's unfortunately not inconceivable.

RATTANSI: But is it more conceivable though that instead of actually joining up, again, it's simply a matter of the facilities being there and various groups using them. It's the free market again. You know, this is where you go to launder money, to get supplies, and so on, but they're not actually joining up in some terrorist umbrella group.

JUNGER: All I can tell you is to repeat what my contact there said. He had been trained in an al Qaeda-Hezbollah training camp by an American Michigan Militia member. What he called Michigan Militia. Maybe he was using the term start of generically. He said he was an American extreme right wing ex-military.

I can't prove it. I have a photo of the man and his name, but I can't prove it. This is what he said. But it is consistent with, unfortunately, consistent with many other things from that area.

RATTANSI: Do you think now though that after that interregnum, when the United States wouldn't believe that anything was going on in the tri- border area, that they are now taking note of this and action is being taken?

JUNGER: I think they're extremely focused on that area now. I think since September 11, there have been links to triple border that American intelligence has not been particularly willing to speak about in public, but they've come up in their intelligence work, and I think they're very focused on it right now.

I think a couple of years was lost, I think in part because it seemed so inconceivable that al Qaeda would be down there, that Shia and Sunni elements would be working together in South America. I think that was almost inconceivable to American authorities, but absolutely confirmed by many sources down there, including this young man, Abdel Fatta (ph), who is now in prison in Brazil and had tried to warn the United States authorities a week before September 11.